Demand for real estate in Dubai is breaking records

Is Real Estate in Dubai a “bubble” that can burst, or an effective financial instrument for a competent investor?

Demand for real estate in Dubai has been breaking records.

How should an investor from other countries behave in this promising market?

Sales of residential, commercial, office real estate, as well as land plots in Dubai in 2022 grew steadily from quarter to quarter, and by October, the number of transactions was 77% higher than the total from the previous year.

Moreover, June turned out to be the most productive month in the last 13 years, and prices rose accordingly by 89%. However, this did not stop investors; in the third quarter, the number of transactions worth over 100 million UAE dirhams (approximately $27 million) increased by almost 1.5 times.

Is it a “bubble” or not? Let’s analyze!

The large-scale success of the Dubai real estate market is due to a number of weighty and objective reasons, which are primarily related to the external economic situation and government policy.

• The UAE maintains diplomatic relations with everyone, creating the most comfortable conditions for the life and business of major market players from different countries and thereby forming a strong business community within their country, which is especially valuable during recession and global instability in the world.
• In Dubai, there are no taxes on income from employment, rental property, dividends, and securities, there is no annual property tax, and inheritance tax - this tax regime attracts many talented entrepreneurs, who are followed by partners and employees. This is a qualitatively new wave of immigration, which inevitably contributes to a strong growth in demand for real estate.

The absence of requirements to explain the origin of funds, interest-free installments for development projects under construction, and the fact that it is quite easy to transfer money to Dubai from anywhere in the world and, moreover, remotely conduct a purchase and sale transaction, makes it a unique city for investment, successful development business, and a comfortable life in general.

• To date, Dubai has attracted a huge number of skilled and wealthy migrants from other regions and is a point of attraction for many successful people: 67,900 dollar millionaires and 13 billionaires live here, and Henley & Partners, for example, believe that the number of rich residents in Dubai will skyrocket and by 2030 the city will be among the twenty richest in the world.
• The rapidly growing demand has led to the saturation of the market with a huge number of different projects under construction and real estate for every taste, color, and size of the wallet. However, few of them are highly liquid from an investment point of view.

Considering the purchase of real estate as a financial instrument, it is important to take into account all the specifics of the Dubai market and pay attention to the following key characteristics:

• The authority of the developer, their portfolio of completed projects, successful investment cases for the purchase and further resale of objects.
• Project location, transport accessibility, infrastructure, and strategically important environment. FE: proximity to the Burj Khalifa business center has a positive effect on the investment attractiveness of the project and further growth in the cost per square meter.
• The moment of entry into the project. It is optimal if there is an opportunity to enter at the pre-sale stage, that is, before the project appears on the open market. Closed sales usually mean the best prices.
• The terms of purchase and further resale, installment plan. When choosing a project, it is important to keep the focus on the most comfortable conditions for the buyer. There are cases when, with the payment of only 34-44% of the project cost, the investor earned on the growth of 10-15% in the future of three to four months.
• The financial scheme of the transaction. Due to the current situation and a number of restrictions, the most common solution to the issue of payment has been to deposit cash into the account of the developer. Many developers in Dubai accept payments with cryptocurrencies. There is also the option of depositing cash into your own bank account in Dubai.
• Rents and the return on investment (ROI) index has begun to increase. Capital growth in Dubai is around 30%.

The above figures clearly outperform some of the key markets in Europe and the US, making Dubai one of the most promising destinations in terms of investment:

• safe preservation and growth of capital, the ability to make a significant profit by renting out an asset or reselling it. It is realistic to provide a yield of 20% to 160%, depending on the project and the moment of exit from it;
• minimization of expenses for the maintenance of the facility due to the absence of real estate and income tax in the UAE;
• the opportunity to obtain a resident visa (when investing in real estate from $240,000) with such advantages as staying in the country without restrictions, opening a bank account, the opportunity to become a tax resident, receive education, medical care, and officially conduct business and work activity in general.

According to the authoritative publication Bloomberg, the dynamics of rising property prices in Dubai will continue for at least the next two years.

Franchising as a major player in the real estate market

The commercial real estate market in Dubai has experienced tremendous growth in recent years, attracting investors from all over the world due to its lucrative terms of rent. Franchises have become the primary renters of available commercial properties. After the pandemic, the demand for franchises has skyrocketed, with more and more people turning to franchising in order to reduce risks and acquire a successful business.

Therefore, the commercial real estate market will only continue to grow, and an ever-expanding franchising industry will become a major part of it.

The combination of all these different factors, the growing economy, the dynamics of demand, the emergence of more and more iconic development projects, and thoughtful cosmopolitanism (e.g. the opening of the largest casino in the world) all strengthen the already growing interest of investors from all over the world.

Still doubting? Let us assist you in making the right choice!